Does Culture Affect Local Productivity and Urban Amenities?

Does a better cultural milieu make a city more livable for residents and improve its business environment for firms? I address this question by computing a measure of cultural specialization based on detailed occupational data for 346 U.S. metropolitan areas. I then estimate hedonic wage and rent equations and ask if differences in the cultural environment across cities capitalize into housing price and wage differentials. Simple correlations replicate standard results from the literature: cities that are more specialized in cultural and artistic occupations enjoy higher factor prices. Using time-series data, controlling for observable and unobservable city characteristics, and implementing alternative specifications weaken the magnitude of this effect. Estimations correcting for reverse causality and endogeneity ultimately show that the impact of culture on city attractiveness is negligible at best. Even though the arts and culture might be appealing to some people and firms, such determinants are not strong enough to affect factor prices at the metropolitan level.